Dollar set for first monthly gain of 2025; yen choppy after BOJ
The dollar headed for its first monthly rise of 2025 on Thursday, fueled by investor confidence in the resilience of the U.S. economy as trade war fears fade, while a more upbeat signal from the Bank of Japan unsettled the yen.
At the conclusion of its two-day policy meeting, the BOJ kept short-term interest rates steady at 0.5% in a unanimous vote, but it upgraded its inflation forecasts for all three years through fiscal 2027 and said risks to the price outlook were “roughly balanced”.
The yen initially rallied, as traders priced in a stronger chance of a rate rise later this year, before reversing course to trade roughly unchanged on the day.
In the broader market, the dollar traded around two-month highs after Federal Reserve Chair Jerome Powell on Wednesday indicated he was in no rush to lower rates and offered little insight on when they might fall again.
The greenback was also on track for its first monthly gain for the year, bolstered by a hawkish Fed and U.S. economic resilience, with uncertainty over U.S. President Donald Trump’s chaotic tariffs easing after an array of trade deals.
The euro has been one of the biggest casualties of the dollar’s ascent this month, as investors have rushed to unwind bets laid on earlier this year on the premise that the European market may offer better opportunities.
The European Union’s agreement this month to 15% tariffs on U.S. exports has cleared up a lot of uncertainty, but at the same time, has delivered a blow to confidence.
The euro was last up 0.3% at $1.1435, having hit a seven-week low on Wednesday. Still, it remained on track to lose nearly 3% this month.
Against a basket of currencies, the dollar rose less than 0.1% to 99.90, set for a monthly gain of about 3%.
BOJ hints at hikes
In Japan, the BOJ said persistent rises in food costs could affect public perceptions of future price moves and speed up underlying inflation.
“Underlying inflation still remains short of our 2% target, but is expected to rise moderately,” Governor Kazuo Ueda told a news conference, in comments some analysts viewed as a possible signal for a rate rise.
The yen softened, leaving the dollar up 0.7% at 150.52, after having fluctuated between a 0.2% gain on the day to a 0.6% loss.
Another range of U.S. trade deals included South Korea, which Trump said on Wednesday would pay a 15% tariff on its U.S. imports. The Korean won strengthened on the news and last stood at 1,389.60 per dollar.
Trump on Wednesday also slapped a 50% tariff on most Brazilian goods and said the United States is still negotiating with India on trade.
Markets have also been faced with a blitz of tariff announcements ahead of an August 1 deadline for countries to secure trade deals or face steep levies.
Source : Reuters
